Filed Pursuant to Rule 497(e)
1933 Act Registration No. 33-10207
1940 Act Registration No. 811-4904
SUPPLEMENT DATED APRIL 1, 1996
TO THE PROSPECTUS DATED JUNE 1, 1995
OF
IAI DEVELOPING COUNTRIES FUND
IAI INTERNATIONAL FUND
(separate portfolios of IAI Investment Funds III, Inc.)
On March 21, 1996, the shareholders of the above-referenced
Funds approved IAI's proposal, effective April 1, 1996, to
eliminate each Fund's Plan of Distribution and corresponding
underwriting agreement with IAI Securities, Inc. and to replace
each Fund's management and administrative agreements with a new
contract between each Fund and IAI. Under this new contract, IAI
will provide, or arrange for the provision of, all services
required by a Fund in exchange for one all-inclusive fee. The
new contracts are not intended to result in a fee change.
Because of these changes, certain portions of this Prospectus
have been updated as set forth below.
<TABLE>
<CAPTION>
FUND EXPENSE INFORMATION
The following replaces the material after the table
"Shareholder Transaction Expenses".
Annual Fund Operating Expenses*
<S> <C> <C>
IAI Developing IAI
Countries Fund International
Fund
Management Fee 2.00% 1.70%
Rule 12b-1 Fee None None
Other Expenses None None
Total Fund Operating 2.00% 1.70%
Expenses
____________________________________________
<FN>
<FN1>
* as a percentage of average daily net assets
</TABLE>
Example:
Based upon the levels of Total Fund Operating Expenses
listed above, you would pay the following expenses on a $1,000
investment, assuming a five percent annual return and redemption
at the end of each period:
<TABLE>
<S> <C> <C> <C> <C>
Fund 1 Year 3 5 10
Years Years Years
Developing $ 20 $ 63 $ 108 $ 233
Countries
International $ 17 $ 54 $ 92 $ 201
</TABLE>
The purpose of the above table is to assist you in
understanding the various costs and expenses that an investor in
a Fund will bear directly or indirectly. The information in the
table has been restated to reflect each Fund's fees as amended
effective April 1, 1996. The example should not be considered a
representation of past or future expenses. Actual expenses may
be greater or less than those shown.
Further information concerning fees paid by each Fund is set
forth in the section "Management" below and in the Statement of
Additional Information.
MANAGEMENT
The following replaces the discussion of Fund
administrative and advisory fees, as well as Fund costs.
Effective April 1, 1996, each Fund has entered into a
written agreement with IAI (the "Management Agreement"), under
which IAI provides each Fund with investment advisory services
and is responsible for the overall management of each Fund's
business affairs subject to the authority of the Board of
Directors. The Management Agreement also provides that, except
for brokerage commissions and other expenditures in connection
with the purchase and sale of portfolio securities, interest and,
in certain circumstances, taxes and extraordinary expenses, IAI
shall pay all of a Fund's operating expenses. As compensation
under the Management Agreement, Developing Countries Fund will
pay IAI 2.00% of its average daily net assets, which fee
declines to 1.65% of its average daily net assets as the amount
of assets in the Fund grows. International Fund will pay IAI
1.70% of its average daily net assets, which fee declines to
1.30% of its average daily net assets as the amount of assets in
the Fund grows. Because IAI is paying Fund operating expenses,
these fees represent each Fund's total expenses. With respect to
certain of the services for which it is responsible under the
Management Agreement, IAI may also pay qualifying broker-dealers,
financial institutions and other entities for providing such
services to Fund shareholders.
Under the replaced Advisory Agreement and Adminstrative
Agreement for Developing Countries Fund, for the fiscal period
ended January 31, 1996, the Fund paid IAI an advisory fee of
0.23% and an administrative fee of .30% of its average daily net
assets. Under the replaced Advisory Agreement and Administrative
Agreement for International Fund, for the fiscal year ended
January 31, 1996, the Fund paid IAI advisory fees of .95% and
administrative fees of .30% of its average month-end net assets.
PLAN OF DISTRIBUTION
The entire section, except the last paragraph, is
eliminated.
Filed Pursuant to Rule 497(e)
1933 Act Registration No. 33-10207
1940 Act Registration No. 811-4904
SUPPLEMENT DATED APRIL 1, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 1, 1995
OF
IAI DEVELOPING COUNTRIES FUND
IAI INTERNATIONAL FUND
(separate portfolios of IAI Investment Funds III, Inc.)
On March 21, 1996, the shareholders of the above-referenced
Funds approved IAI's proposal, effective April 1, 1996, to
eliminate each Fund's Plan of Distribution and corresponding
underwriting agreement with IAI Securities, Inc. and to replace
each Fund's management and administrative agreements with a new
contract between each Fund and IAI. Under this new contract, IAI
will provide, or arrange for the provision of, all services
required by a Fund in exchange for one all-inclusive fee. The
new contracts are not intended to result in a fee change. Because
of these changes, this Statement of Additional Information has
been updated as set forth below.
Management Agreement
Effective April 1, 1996, each Fund entered into new written
agreement with IAI (the "Management Agreement"). Pursuant to the
Management Agreement between each Fund and IAI, IAI has agreed to
provide each Fund with investment advice, statistical and
research facilities, and certain equipment and services,
including, but not limited to, office space and necessary office
facilities, equipment, and the services of required personnel
and, in connection therewith, IAI has the sole authority and
responsibility to make and execute investment decisions for a
Fund within the framework of such Fund's investment policies,
subject to review by the directors of the Funds. In addition,
IAI has agreed to provide or arrange for the provision of all
required administrative, stock transfer, redemption, dividend
disbursing, accounting, and shareholder services including,
without limitation, the following: (1) the maintenance of a
Fund's accounts, books and records; (2) the calculations of the
daily net asset value in accordance with a Fund's current
Prospectus and Statement of Additional Information; (3) daily and
periodic reports; (4) all information necessary to complete tax
returns, questionnaires and other reports requested by a Fund;
(5) the maintenance of stock registry records; (6) the processing
of requested account registration changes, stock certificate
issuances and redemption requests; and (7) the administration of
payments and dividends and distributions declared by a Fund; (8)
answering shareholder questions, (9) providing reports and other
information and (10) other services designed to maintain
shareholder accounts. IAI may also pay qualifying broker-
dealers, financial institutions and other entities that provide
such services. In return for such services, each Fund has agreed
to pay IAI an annual fee as a percentage of such Fund's average
daily net assets as set forth below:
<TABLE>
<CAPTION>
Developing Countries Fund
Daily Net Assets Fee IAI Receives
Annually
<C> <C>
For the first $100 million 2.00%
For the next $150 million 1.95%
For the next $250 million 1.75%
Above $500 million 1.65%
</TABLE>
<TABLE>
<CAPTION>
International Fund
Daily Net Assets Fee IAI Receives
Annually
<C>
<C>
For the first $100 million 1.70%
For the next $150 million 1.45%
Above $250 million 1.30%
</TABLE>
Except for brokerage commissions and other expenditures in
connection with the purchase and sale of portfolio securities,
interest expense, and, subject to the specific approval of a
majority of the disinterested directors of a Fund, taxes and
extraordinary expenses, IAI has agreed to pay all of a Fund's
other costs and expenses, including, for example, costs incurred
in the purchase and sale of assets, taxes, charges of the
custodian of a Fund's assets, costs of reports and proxy material
sent to Fund shareholders, fees paid for independent accounting
and legal services, costs of printing Prospectuses for Fund
shareholders and registering a Fund's shares, postage, insurance
premiums, and costs of attending investment conferences. The
Management Agreement further provides that IAI will either
reimburse a Fund for the fees and expenses it pays to directors
who are not "interested persons" of such Fund or reduce its fee
by an equivalent amount. IAI is not liable for any loss suffered
by a Fund in the absence of willful misfeasance, bad faith or
negligence in the performance of its duties and obligations.
